Is Amazon FBA Still Worth It in 2024? The Pros & Cons (2024)

Amazon FBA is still a worthy entrepreneurship and selling opportunity in 2024.

While the e-commerce sales market is more competitive than in previous years, it’s nowhere near saturation as new markets, niches, and products open up to sellers.

However, following outdated selling strategies may put sellers on the back foot and at a loss. So, keep reading to discover how (and why) this business opportunity remains viable in 2024.

• Selling via Amazon FBA is profitable in 2024.
• More than half of new sellers were profitable within the first year of launching their Amazon business in 2022.
• You can spend as low as $500 to sell on Amazon.

Fulfillment by Amazon, popularly known as FBA, allows sellers to delegate specific fulfillment-related tasks, including inventory storage, packing, customer service, and shipping, to Amazon.

FBA sellers leverage Amazon’s global logistic support to streamline operations and scale their e-commerce businesses.

As its name implies, Fulfillment by Amazon focuses on optimizing the order fulfillment process. Simply put, it embodies every little detail that may help a seller deliver products to customers promptly and efficiently.

Hence, FBA provides a suite of services that activates when customers place orders, as explained below.

Sellers usually follow a cyclic flow of operation that uses all four components of Amazon FBA. The steps involved in this cycle are as follows:

1. First, you ship your products to an Amazon fulfillment center for storage. This process transfers inventory management responsibilities to Amazon, so you don’t have to worry about security, monitoring, and space.
2. After securing storage space for your products, list them on the Amazon website. Make sure to indicate that Amazon is in charge of shipping, returns, and other order fulfillment processes.
3. Once a customer places an order, Amazon processes the payment, updates your inventory, and initiates the logistics requirements for fulfilling the order.
4. Amazon provides 24/7 customer service to your customers before and after product delivery. As such, return and refund requests are processed on your behalf, reducing the time spent settling disputes.

You now know the workings of Amazon FBA and how it improves sellers’ order fulfillment process. However, like all business models, there are counterproductive effects of using Amazon FBA.

Below is a breakdown of the benefits and disadvantages of Amazon FBA:

Amazon FBA is still a worthwhile venture in 2024 since 89% of sellers were profitable in 2022. Also, 55% of small and midsized Amazon businesses recorded profit margins greater than 15%.

All these numbers point to one thing: Amazon sellers are still finding ways to generate profit despite steep competition. You might be wondering, “Can new FBA users also replicate this type of success?”

Although experience generally impacts profitability, new sellers break even quickly and would likely record profits in their first year of operation. In fact, 63% of sellers made a profit within the first year of using the Amazon platform as of 2022.

As mentioned earlier, FBA is not a free-to-use service. Amazon uses a module-based pricing system that sets different rates for each specialized service provided to FBA sellers:

• Selling plan: As part of the registration procedure, you must pay a setup fee to become eligible to sell on Amazon. The options available are an individual plan, which requires that you pay $0.99 per item sold, or a $39.99 monthly professional plan.
• Referral fees: Depending on your product category, Amazon charges 6%-45% of the unit price of each item sold as referral fees.
• Fulfillment fees: Amazon considers several factors, including shipping weight, size, and product type, to set fulfillment prices.
• Inventory Storage fees: FBA sellers pay a monthly storage fee based on the size of their inventory and the space it occupies at fulfillment centers.
• Other fees: Besides the above-listed charges, you may be subject to additional Amazon FBA fees. This is primarily when you activate optional services or exceed predefined service limits. For instance, inventory surcharges apply to products stored in fulfillment centers for more than 181 days.

Looking at the Amazon FBA seller fee structure above, you’ll agree that it may take a lot of work to keep up with the multiple pricing modules applicable to FBA sellers.

This is especially true for sellers operating a high-volume retail Amazon business without setting effective price strategies that account for long-term FBA costs.

Apart from cost, the specialization of FBA (inventory management and shipping) may also hurt profitability. Due to the heavy focus of the FBA model on inventory, it’s easy to lose sight of other aspects of your business, especially when allocating resources.

FBA requires a significant initial investment in inventory because the business model depends on stock availability. And so, inexperienced FBA sellers with limited resources might prioritize stock availability at the expense of other key business drivers like marketing and branding. Often, such poor resource allocation strategies lower the chances of earning profit.

That’s why you should get a tool like Helium 10, which offers you everything you need to stay on top of multiple aspects of your Amazon business from the same dashboard.

According to a recent study, Amazon hosts around 9.7 million sellers, of which 1.9 million are active. Regardless of the promising profitability stats mentioned earlier, competition is very high on the Amazon platform.

In other words, it requires intense planning and tact to become profitable. Sellers need to evolve to stay ahead of trends. Otherwise, it becomes much harder to break even, let alone generate profit.

Amazon FBA sellers are heavily dependent on Amazon’s logistic infrastructure, so the policies and regulations governing the platform apply to you.

And knowing that such rules are bound to change from time to time, it’s only a matter of time before you need to make small or large alterations to your business to remain compliant.

In some cases, such alterations may strain sellers’ operations and cause them to lose money. The situation becomes dire when new policies inadvertently increase business costs.

We’ve already established that selling on Amazon is highly competitive.

However, it’s worth noting that this high saturation is a product of Amazon’s growing popularity among shoppers, as Amazon accounts for almost 40% of the global eCommerce market.

In other words, this high saturation of sellers is effectively countered by the steady growth of buyers flocking to the Amazon marketplace.

So, it’s no more a question of how competitive the Amazon platform can be.

Instead, you should be more interested in finding ways to beat the competition.

This is where planning and innovation come into play.

For new sellers, it’s advisable to carry out extensive product research. This approach reduces the propensity of jumping into short-term trends impulsively, as data back all your decisions.

This is possible with seller-friendly tools like ZonGuru (get free trial) and Helium 10 (get free trial).

Even as FBA helps do all the heavy lifting regarding inventory and shipping, note that other aspects of your eCommerce business need almost the same level of attention.

So, avoid resource-allocation strategies that favor one or two components of your business to the detriment of others.

As you set aside capital to meet the pricing and management requirements of selling via FBA, remember that marketing and branding are just as crucial to the success of your business.

You can leverage tools like Helium 10’s Adtomic or grab a Seller Labs free trial to optimize ad and marketing campaigns for your business.

Note that an eCommerce business isn’t a get-rich-quick scheme. It takes time to generate significant liveable income. And even if you earn enough in the first few months, taking funds out early in your business isn’t advisable.

A more measured approach would be to focus on long-term success. With this mindset, you can painstakingly build a sustainable business from the ground up.

The cost and time requirements for launching a product on Amazon vary depending on various factors, including the size and type of business and the amount of effort put into it.

Someone with access to a significant startup budget would launch sooner than a financially-restrained individual. Applying the same logic, it would likely take a shorter time for a full-time Amazon seller to launch their first product.

Furthermore, the type of Amazon business you run will also impact the time and money it takes to start. For instance, you’ll require significant investment to launch a private-label product (Items sold under your brand name). In contrast, reselling other people’s products on Amazon takes less time and money.

That said, It took fewer than six months for 70% of sellers to launch products on Amazon, while 19% spent up to a year to start.

Regarding financial requirements, more than half of sellers (58%) spent under $5,000 as startup capital, 25% started with under $1000, and 12% needed less than $500 to launch in 2022.

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The simple answer to this question is yes, considering that the chances of earning profits via selling on Amazon FBA are still relatively high, even in 2024.

But as with all promising business ventures, there’s a catch. Without the much-needed effort and investment, there’s no guarantee of success. As much as FBA delegates much of the heavy lifting to Amazon, the business still needs your daily inputs to run smoothly.

So, find the right product, keep business costs low, invest in branding and marketing, and optimize your day-to-day operations with tools like Helium 10.